High cost of protection

The cost of covering yourself against disaster is set to soar. The average family faces an increase in their insurance costs of around £140 a year.

The rises could be brought about by the combined effects of inflation-busting price increases and possible Budget tax rises. An average family currently spends around £300 on home insurance, £320 on car and may spend £406 on medical insurances, according to the Office of National Statistics - and this will rise by at least 10 pc this year.

The price of insurance has been increasing over the last year in all areas of general insurance.

Last year the cost of buying car insurance increased by 10 pc and the cost of home insurance 5 pc according to the Association of British Insurers (ABI). The cost of private medical insurance rose by up to 25 pc.

And these increases are likely to be repeated again this year as the motor insurance industry alone made a loss of £1.2 billion.

John Pollock, director of protection at Legal & General, says: 'Our motor premiums are going up by about 10 pc but the market as a whole is rising by up to 20 pc. There is a lot of talk at the moment about household insurance premiums rising but it is not at the same rate.'

Marc Donfrancesco, marketing manager at Independent Insurance, says: 'We are currently remodelling the way our home insurance plans are priced. There is likely to be activity in June/July when we, along with other companies, announce the new rates.'

But home and car owners could be hit by a double whammy if rumours that insurance premium tax is set to be doubled to 8 pc in the Budget on March 9, are proved true.

Tony Baker, deputy director general at the ABI, says: 'Motor premiums will have to go up because for every £1 in premium income earned and collected £1.16 is paid out in claims.

'Currently one in twenty drivers are uninsured and the rising cost of insurance will mean that this number increases.

The amount of other types of insurance bought will also fall if premiums rise - not to mention if insurance premium tax goes up as well.'

New rules forcing insurers to pick up the cost of NHS treatment for road accident victims will put a further strain on prices.

Insurers warn this could add an extra £10 a year on to the cost of every policy.

David and Stephanie Button, from Lichfield, Staffordshire, know all about premiums increases as their home contents insurance is set to rise by nearly 10 pc this year.

'We currently pay £24.80 a month for combined buildings and contents and this is set to rise by £2 a month in April, even though we haven't made any claims or changed our circumstances in any way,' says David (pictured), 27, who runs his own information technology consultancy firm. He is also set to pay £460 a year to cover his new car, a Peugeot 406 Executive. 'Although I don't take delivery for a month I have got a guaranteed quote which will not rise regardless of whether premiums or insurance premium tax rises. Motor premiums are also definitely on the way up this year.'